Accounting board FASB proposes cash rules for stablecoins
The US accounting board FASB proposes conditions under which companies may treat certain stablecoins as cash equivalents under US GAAP. Qualifying tokens would need on-demand issuer redemption for a known cash amount and one-to-one liquid reserves. Secondary-market trading alone would not suffice, the board said Tuesday.
The Financial Accounting Standards Board issued a proposed Accounting Standards Update for companies that hold digital assets. The draft would add illustrative examples to the existing cash-equivalents definition, which itself would remain unchanged, to address inconsistent treatment of tokens such as stablecoins.
Key Takeaways
- FASB would keep the current cash-equivalents definition and add examples for digital assets.
- Holders would need a direct, on-demand redemption right with the issuer for a known cash amount.
- Reserves would have to be segregated, at least one-to-one, and held in short-term, highly liquid assets.
- Secondary-market liquidity would not be enough; crypto-and-gold reserves would fail the test.
- Public comments are open until Nov. 19, with an effective date to follow stakeholder review.
What conditions would a stablecoin need to qualify?
Under the proposal, a qualifying digital asset would need an on-demand contractual redemption right and a direct redemption right with its issuer for a known cash amount. It would also need at least one-to-one segregated reserves held in short-term, highly liquid assets.
One illustrative example said active secondary markets would not be enough if the holder lacks a direct issuer redemption right. Another said reserves comprising crypto assets and gold would disqualify a token because of valuation risks.
Those tests will shape how finance teams classify tokens they want to treat like cash. Follow more fintech and crypto alerts as US standard-setters update digital-asset rules.
Why is the accounting board FASB proposing this now?
The Financial Accounting Standards Board said the examples are meant to reduce inconsistent treatment of digital assets, including stablecoins, under generally accepted accounting principles in the United States. Companies that meet the tests would still choose whether to present qualifying assets as cash equivalents.
They would also need to consider relevant laws and regulations. The proposal sets conditions rather than clearing every stablecoin for cash-equivalent presentation.
The move comes as other US agencies weigh crypto market rules. The Securities and Exchange Commission has separately proposed a framework that would offer companies a safe harbor from tokens being treated as investment contracts, after Congress failed to pass the CLARITY Act before its August recess.
When could companies apply the new examples?
FASB is accepting public comments on the proposed update until Nov. 19. The organization will set an effective date after reviewing stakeholder feedback.
Until then, treatment of stablecoins as cash equivalents may remain inconsistent, which is the issue the board is trying to fix. Issuers and holders seeking that classification will need contractual redemption rights and liquid, one-to-one reserves, not merely active trading.
The comment period gives companies, auditors, and token issuers time to respond before any examples are finalized. Companies would retain the choice of whether to present qualifying assets as cash equivalents.